CMS confirms that transfer penalty for Medicaid home care applicants starts to run at time of application

Followers of this blog know that when a person applies for Medicaid under the New Jersey MLTSS program or other state programs that pay for nursing homes, assisted living or home health care services, there is a 5-year look-back that is done by the agency to determine if a transfer penalty should be imposed for gifts made during the 5 years preceding the application. The penalty is a period of time in which the State won’t pay for the care. The greater the amount that was gifted, the longer the penalty period.

There has been a problem for years that was inadvertently created when the Medicaid law was amended by the Deficit Reduction Act of 2005 (“the DRA”). The problem was caused by an interpretive guidance memo called State Medicaid Director Letter (SMDL #06-018) published on July 27, 2006 by CMS. The DRA itself specified that the start date of the penalty was to be “the later of (1) the month during or after which a transfer is made or (2) the date on which the individual is eligible for medical assistance under the State plan and would otherwise be receiving institutional level care services.” See Secn. 1917(c)(1)(D) of the Act. However, the 2006 explanatory SMDL stated that the start date was “…the date on which the individual is eligible for Medicaid and is receiving institutional level of care services.” (emphasis added). The problem was obvious — it created a catch-22 in which the penalty wouldn’t start to run until the individual was receiving services, yet no services could be provided until a penalty period had ended! Also, the memo was at odds with prior positions that applied resource rules and transfer penalty rules uniformly to people applying for Medicaid in different settings.

Well it only took 12 years, but the good news is that CMS has just published SMD # 18-004 which clarifies the point once and for all: the start date for applicants for home and community services is the date on which they’d be receiving services were it not for the penalty period. Here it is: CMS SMD # 18-004

Asset protection is feasible even when a person is right on the verge of applying for Medicaid. Houses and other assets can be protected with proper senior care planning. Call us first, to advise you and prepare your Medicaid application…. 732-382-6070

Medicaid estate recovery liens often take people by surprise

On March 24th, PBS news hour had a segment called “The Medicaid Bill that doesn’t go away when you die.” The program described the impact of estate recovery liens which are pursued by State Medicaid Programs. Estate recovery is required by federal law in 42 USC 1396p. The New Jersey  lien statute is at N.J.S.A. 30:4D-7.2(a)(2). The lien is imposed after death against property that was owned by a Medicaid recipient at the time of his death. Congress allows States to go after not just the solely-owned “probate assets,” but any asset in which the Medicaid recipient held any legal or equitable title at time of death, such as jointly-held assets that otherwise pass to a surviving co-owner. this is called the “expanded estate.”

We just handled an estate of someone.  who died many years ago owning a property that just never got sold until 2014. Her many heirs were hopeful for some inheritance. We contacted the State Medicaid office, as the Executor had no idea whether the deceased had been on Medicaid or not.  It turned out she had received Medicaid benefits after age 55 which, in the last year alone, exceeded the total value of the property that remained in her estate. The lien  recovers for ALL Medicaid services provided after age 55.

Careful planning can avoid Medicaid liens, but failure to plan could be a recipe for the heirs’ losses later.

Call us for advice and representation concerning Medicaid issues, applications and appeals … 732-382-6070